2013-2014 Summer Assignment for AP Microeconomics & Macroeconomics

READ: Naked Economics: Undressing the Dismal Science, Charles Wheelan, W.W. Norton, 2010. Completely- cover to cover.

Directions:

Create a time management plan for your reading schedule to ensure you have ample time to read the book. Set due dates for each chapter and each part of the assignment. Review your schedule with a parent or guardian.

Expectations: Work must be typed, 12 point font, double-spaced, using MLA formatting. Label each section appropriately with the appropriate chapter title. Please check your work for complete sentences and grammatical errors. For each response, you must support your answer with specific evidence from the book using MLA formatted in-text citations.

Due Date: September 3, 2013! No points will be awarded for late work. Be prepared to participate in a class discussion the first week of school.

Questions:

Foreword by Burton G. Malkiel

Microeconomic Question(s)

  1. The study of economics has often been criticized for a variety of reasons. What are those reasons?
  2. The influence of economics is present in many business, financial, and government communities. What are some institutions and agencies that rely on economics in some significant way?

Introduction

Microeconomic Question(s)

  1. Give one example of a politician (in the United States or abroad) who has failed to understand economics and as a result, failed to understand how to solve a problem society faces.

Chapter 1: The Power of Markets

Macroeconomic Question(s)

  1. In a paragraph, summarize the main points of chapter one. Note that simply listing the bolded statements will get you zero points. There are key ideas and assumptions in this chapter.

Microeconomic Question(s)

  1. What does it mean to “maximize your utility?”
  2. What are some “barriers to entry” that make it so only seller can provide a good or service? Why are barriers to entry important?
  3. What is meant by “price discrimination?” Why do you think airlines are able to price discriminate?
  4. What does Wheelan mean when he says the market economy operates as an “amoral force?”
  5. Besides prices, what is another way that firms can compete in order to outperform their competition?
  6. According to Wheelan, what makes markets a good way to organize economic activity?

Chapter 2: Incentives Matter

Macroeconomic Question(s)

  1. Explain why incentives matter. What you think about the author’s ideas on black rhino conservation? Explain what perverse incentives are and give examples from a high school student’s life.

Microeconomic Question(s)

  1. What problem do communal resources present, as compared to privately owned resources?
  2. Why do incentives matter? Use an example from the book as well as from your own life to explain your response.
  3. The law of unintended consequences states that “actions of people – and especially of government – always have effects that are unanticipated or unintended” (The Concise Encyclopedia of Economics). While important to recognize, politicians often fail to understand its significance. Provide one example mentioned in the reading that illustrates this point.
  4. “Capitalism can be a brutal, cruel process…But ‘creative destruction’ (Joseph Schumpeter) is a tremendous positive force. Competition means losers, which goes a long way to explain why we embrace it in theory and fight it bitterly in practice.” Explain this statement, and give an example.

Chapter 3: Government and the Economy

Macroeconomic Question(s)

  1. Summarize this chapter in 1-2 paragraphs. Why might government regulations and lawyers be a good thing? Include specific examples.

Microeconomic Question(s)

  1. What positive and negative externalities are associated with cigarette smoking? Can you make the case that the positives outweigh the negatives?
  2. What makes taxation a good solution the problem of negative externalities?
  3. List all of the ways that government is essential in order for a market economy to operate successfully.

Chapter 4: Government and the Economy II

  1. Summarize this chapter in one paragraph. Include specific examples of government involvement as needed. In another paragraph, be sure to discuss the government’s “grabbing hand” as it licenses and regulates businesses in third world countries versus Capitalist nations.

Chapter 5: Economics of Information

  1. What does information asymmetry have to do with the hiring process, in regards to gender? What does the author feel about this discrimination? Do you agree with him? Explain. What do you feel about his long term solution to this problem?
  2. Explain the problem of private health insurance? Why do the costs continue to rise? What is the problem with public health insurance? Discuss adverse selection, as it relates to this chapter.

Chapter 6: Productivity and Human Capital

  1. The author discusses the symptom of being poor, and the illness of being poor. What does the author mean? Do you agree with him? Explain. How does the poverty line right now compare to 100 years ago? Why is America like a real life version of “Revenge of the Nerds?” What’s so important about Human Capital?

Chapter 7: Financial Markets

  1. What does the efficient market theory have to do with financial markets? Discuss the positives and negatives of the theory. Why do Wall-Street types not like it? Explain the coin flipping experiment, as it relates to investment diversification.

Chapter 8: The Power of Organized Interests

  1. Why have mohair farmers earned a subsidy from the federal government for decades? What can you derive that economics tells us about politics?

Chapter 9: Keep Score

  1. Explain how the average American is three times as rich as they would have been in 1950. Explain the most effective “knock” on GDP. What does the author think about the effectiveness of fiscal policy? Explain how a current account surplus/deficit can be good and bad.

Chapter 10: The Federal Reserve

  1. What is the drastic consequence of poor monetary policy the author discusses at the start of the chapter? Do you agree with this argument? Explain. What is the relationship between governments who owe money, government polices to fight inflation, and monetary policy? Does this change your opinion of how monetary policy is used by the US Government?

Chapter 11 & 12: International Economics& Trade and Globalization

  1. What is the relationship between specialization and productivity? Discuss, in two paragraphs or less, your opinions on globalization after reading this chapter. Cite data from the book to prove your point. Finally, discuss the problem of “good intentions” on globalization and “sweatshops.” What do you propose to solve this problem?

Chapter 13: Development Economics

  1. After reading this chapter, explain and discuss what we can do to help developing nations. What do these nations need to do to help themselves?